TO: Honorable Mayor and Members of the City Council THROUGH: Mark Danaj, City Manager FROM: Stephanie Katsouleas, Public Works Director Prem Kumar, City Engineer Anna Luke-Jones, Sr. Management Analyst SUBJECT:..Title 2016/17 Mid-Year Review of Capital Improvement Projects (CIP) Program and Presentation Regarding the Status and Future of the 5-Year CIP Program (Public Works Director Katsouleas). RECEIVE AND FILE ..Line _________________________________________________________ ..Recommended Action RECOMMENDATION: Staff recommends that City Council: 1) Receive and file the CIP Mid-year update; and 2) Discuss and provide direction on the future implementation of the CIP Program based on the information presented herein and the FY 2016/17 and FY 2017/18 Adopted Capital Improvement Policy and Capital Budget Fiscal Policy. ..Body EXECUTIVE SUMMARY: In FY 2016/17, City Council adopted a two-year budget, with a plan to focus specifically on the CIP Program in the “off year,” or FY 2017/18. Since becoming the P ublic Works Director last fall, I have had the opportunity to review the entire CIP Program and the challenges it faces in achieving full and successful project implementation. This staff report provides a mid-year update on the adopted FY 2016/17 5-Year CIP, as well as a fresh look at how existing and future projects can best be implemented to achieve the proposed CIP schedule, with a specific focus on project demand versus available staff resources. The Capital Improvement Projects (CIP) Program is a core function of the City; it includes projects and studies that address the City’s extensive infrastructure needs, and is typically projected as a 5-year program. For the current 5-year program (FY 2016- 2021) five (5) projects were completed between July and December, 2016. Another 39 projects are currently underway totaling just over $40 million, while an additional 39 projects (worth over $12 million) should have been but have yet to be initiated due to limited resources. Implementing capital projects require significant staff time, as almost all projects follow a thorough 5-step process which is outlined in the Discussion section of this report.
Notably, given the City’s existing and projected 5 -Year CIP list, there remains a sharp imbalance between the hours needed to complete approved capital projects and the staff resources currently available. In order to successfully complete the planned projects and allow necessary projects to be added each year, staffing resources will need to be augmented. Without these additional resources, Public Works will be unable to meet the current and scheduled demand in a timely manner, and revisions to the 5- year CIP will be necessary. Note that City Council will be asked to consider two alternatives after reviewing the information presented in this staff report, which are to: a) reduce the forecasted number of capital projects that can be implemented over the next five years, or b) increase resources for project implementation to meet the current demand. The outcome of that decision will guide the upcoming CIP review process and actions recommended during the budget sessions, and will include a proposal that correctly aligns the Engineering Division resources with what can realistically be accomplished during each fiscal year moving forward. FISCAL IMPLICATIONS: There are no fiscal implications associated with receiving and filing the CIP Mid-year Update. Any fiscal implications associated with the future implementation of the 5-year CIP program will be evaluated following direction received by City Council. BACKGROUND: The City of Manhattan Beach has a robust Capital Improvement Project (CIP) Program, consisting of infrastructure projects and studies that address streets, buildings, parks, water and wastewater utilities and other public and right-of-way improvements. Many of the City’s infrastructure projects are routine (e.g., slurry, street resurfacing, main replacements), while other projects are “one - time,” unique projects (e.g., skate park, reservoir replacement, facility upgrade). The annual CIP program also needs to have the flexibility to address emergency repairs that cannot be anticipated (e.g., elevator repair, pump malfunction). Combined, these projects and studies place a heavy demand on engineering staff resources, whose overarching goals are to complete projects under budget and on-time in conformance with the adopted Capital Improvement Policies. Funding for the City’s CIP comes from at least 20 different sources, which are grouped into four basic categories: • City Funds (General Fund, TOT and Citations) • Enterprise Funds (Water, Wastewater, Storm Drain, Parking Meters, State Pier Fund) • Special Revenues and Local Returns (Prop C, Measure R, Measure M, Gas Tax, Landscaping and Lighting) • Grants (Community Development Block Grant, Safe Routes to Schools, Parks Grants, Metro, Federal Highway Administration, South Bay Highway Program) Combined, the City, Enterprise and Special Revenue Funds yielded a net contribution to
the CIP program of approximately $10.7 million in FY 15/16. Over the last five years, the City has experienced growth in these funds. That trend is expected to continue, in particular with the addition of the Measure M funding starting in the fall of 2017. Collectively, these dedicated funds are and will continue to be used for future capital improvement projects. Grants fund contributions vary each year based on project awards. Each year, the Department of Public Works proposes capital projects and studies for inclusion in the City’s 5 -year Capital Improvement Program. The projects proposed typically represent the basic infrastructure maintenance and replacement needs of the community, City facilities and the public right-of way. Prior to being added to the CIP, the proposed projects and stud ies are evaluated by the City’s engineering staff for need, feasibility of implementation, cost effectiveness, potential hurdles, available funding resources and scheduling. The City Council reviews the draft list before it is presented to two commissions. Once finalized, the draft list is presented to the Planning Commission for conformance with the General Plan. The final draft is reviewed and ultimately approved by City Council (with or without modifications). The adopted 5-year CIP is reviewed annually, and when necessary modifications are made by adding new projects, removing projects if priorities have changed, and/or rescheduling projects based on available resources. Often times, grant funding requirements or restrictions dictate how and when a project is implemented. Once the annual and 5-year CIP list is approved during the budget process, Public Works then provides a semi-annual update on their status. This staff report include a mid-year status update of the FY 2016/17 CIP Program, along with an assessment of the resources currently available the CIP versus what is needed to effectively carry out the mission of Capital Improvement Program itself. DISCUSSION: Historically, Manhattan Beach has had limited staff resources to carry out the volume of capital projects proposed and approved, which in turn has led to a growing backlog of projects to be implemented. In addition to the mid-year update, this staff report and associated PowerPoint presentation (Attachment 7) provide data that compares the workload demand with available staff resources, and offers alternatives for moving forward to successfully implement the CIP program. Mid-year Update: The 5-year CIP adopted for FY 2016/17 through FY 2020/21 identified 124 separate projects that included carry over projects from prior years as well as current projects and those scheduled to be implemented sometime within the next five years. The total allocation (appropriated and earmarked) for those projects is nearly $108 million. However, it is worth noting that the actual number of projects that should be implemented by Public Works over the next five years is higher because the following projects were not listed on a previous plan but are needed: • Water Main Replacements (annually for 5 years)
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